A Case Study of Singapore as a Logistics Cluster

A Case Study of Singapore as a Logistics Cluster

Rahul Krishnan (SP Jain Management Centre, Singapore), Anvita Desai (SP Jain Management Centre, Singapore), Han Vu Tran Ngoc (SP Jain Management Centre, Singapore), Nazia Tarannum (SP Jain Management Centre, Singapore) and Tien Phan (SP Jain Management Centre, Singapore)
DOI: 10.4018/978-1-4666-0065-2.ch001


Industrial Clusters tend to grow in locations where there is a suitable environment that give them a competitive advantage over other places. Logistics industry typically develops as a cluster around ports with high efficiency. Over the years, Singapore has evolved as a logistics cluster, with the presence of the world’s top 3PL companies choosing to operate therein. Moreover, a number of countries are developing their infrastructure to attract international logistics service providers here. This case examines the future prospects of Singapore as a logistics hub.
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After a brief general overview of industry clusters, this study explores the formation of Hi-Tech Clusters in Singapore followed by an in-depth analysis of the formation of Singapore’s Logistics Cluster. This research aims at determining the factors which contributed to the formation of a logistics cluster in Singapore. A group of top 3PL companies with regional headquarters in Singapore shared their views on the evolution of Singapore as a logistics hub. Furthermore, to illustrate the strength of logistics in Singapore, this study presents an evaluation of how Singapore stands with respect to its competitors in Asia Pacific.

The results of analysis of the data through radar graphs and perception mapping techniques indicate that logistics services providers rate the strategic location, legal and customs processing, and quality of the infrastructure as the most important factors while determining a location for their operations. A key finding from the interviews is that even though the cost of doing business in Singapore is high, it is off-set by the efficiency in customs and legal processes. However, a few small and medium enterprises, that are relatively new to the industry, may tend to go for lower cost markets, primarily to avoid heavy competition and high barriers to entry in this logistics cluster.

Interview findings indicate that, Singapore is clearly the location of choice with respect to other countries in the Asia Pacific. Though, some of the other countries have low cost of operations and rapid growth of development it will take considerable time for them to reach the competency of Singapore. Another key finding is that, for logistic service providers, the presence of competitors in a location does not affect the choice of their operating location; the decision primarily depends on the needs of their customers at that location.

The results of qualitative research reveals that there is a significant shortage of high skilled logistics professionals. However, this is partly addressed by free immigration policy. But special attention must be given to this issue to make sure that the industry is not affected due to lack of skilled labour. The results also reveal that the global recession has resulted in reduction in freight volumes. Howver, the industry is expected to rebound this year.

This study also identifies a few areas where improvement is needed. The findings are summarized below:

  • To keep up with the growing volumes of container and freight traffic it is important to conduct demand forecasting the.

  • Reduction in the time lag at the pre-clearance cargo customs will help in avoiding losses for the logistic service providers.

  • Integrated IT solutions which provide a dashboard to view services of all clients across different business units on a single platform will improve efficiency.

  • As biomedical industry is growing very fast in Singapore, developing competency in collaboration with various research institutes would be helpful in tackling demands of this industry. Manpower development (such as logistics planner and analysts who have in-depth knowledge of industry verticals) through training and education programs will help in achieving this objective. Moreover, Singapore should examine opportunities for cost reduction and pricing to attract cost-sensitive companies into the cluster. Few Government initiatives can facilitate the growth of SME’s by helping them with niche solutions.

The Singapore government has always been very proactive in living up to the changing needs of business. Although ahead of its competitors in various aspects like infrastructure, multimodal connectivity, shipping and aviation, Singapore has to keep reinventing itself to maintain its lead as a world-class logistics hub.

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